EUR/JPY Price Forecast: Softens to near 184.50, mildly bearish bias persists under 100-day SMA

The EUR/JPY currency pair is currently trading near 184.60 in negative territory during early European trading hours on Wednesday. The Japanese Yen (JPY) is gaining strength against the Euro (EUR) as the Bank of Japan (BoJ) issues hawkish signals. Japan's National Consumer Price Index (CPI) inflation report is scheduled for later on Friday, which will likely have an impact on the pair.

Speculation is growing that the BoJ may raise interest rates in the coming months, providing support to the JPY. Reuters reported on Friday that the central bank is considering a rate hike as early as September, with overnight index swaps pricing in an 80% chance of a move by that month. However, concerns over fiscal issues in Japan could also weigh on the JPY.

Prime Minister Sanae Takaichi's proposal to lower the consumption tax on food to 1% for two years has raised market concerns, as the government has not yet outlined an alternative revenue source, and the measure is considered ineffective in combating inflation. Strategists at DBS note a shift in Japan's policy backdrop, with Takaichi becoming "more supportive of raising interest rates to stabilize the JPY."

This evolving political stance is strengthening the case for a less accommodative policy mix, as authorities increasingly view higher rates as a means to strengthen the Yen and address domestic concerns. In the daily chart, EUR/JPY shows a mildly bearish near-term bias as it trades below the 100-day simple moving average (SMA) at 185.10.

The currency pair remains within the Bollinger Bands, sitting above the middle band support but below the upper band resistance, suggesting limited upside potential while the Relative Strength Index (14) is neutral at 52.71. The next resistance level is at the 100-day SMA, with a potential upside barrier at the June 17 high of 186.32 and the upper Bollinger Band around 187.65.

Downside support is at the Bollinger middle band at 184.10, followed by a deeper cushion near the August 10 low of 182.70. A pronounced corrective phase could find demand around the lower band at 180.50.